Mutual Fund Trailing Commissions: GST/HST Changes

CRA has determined that mutual fund trailing commissions generally no longer meet the definition of a financial service and therefore constitute taxable supplies subject to GST/HST.

CRA had initially indicated that it would begin enforcing this treatment for taxable supplies made by dealers on or after July 1, 2026.

That enforcement date has now been delayed until January 1, 2028 to provide the industry with additional time to prepare.

CRA nevertheless encourages dealers to apply the new tax treatment as soon as possible.

Some trailing commissions were already taxable under existing rules, and their tax status has not changed.

Input Tax Credits

Dealers that collect GST/HST on trailing commissions before January 1, 2028 may generally claim input tax credits for GST/HST paid on business expenses attributable to those taxable supplies, subject to the normal rules.

Mutual fund managers paying GST/HST on those commissions may also be entitled to recover the tax paid.

However, where a dealer claims input tax credits before the enforcement date for inputs associated with trailing commission supplies, CRA will enforce the corresponding obligation to remit GST/HST on those supplies.

Action: Investment dealers and advisors should review how the new GST/HST treatment may affect trailing commissions well before the 2028 enforcement date.